Troubles for Indian no-frills airline SpiceJet do not seem to end. While there is a winding-up petition filed by Credit Suisse AG against the airline currently being heard in the Supreme Court of India, the airline has recently been settling some of the many lawsuits against the airline from De Havilland Canada and some from lessors. Now, one of the world’s biggest public markets investors is unhappy with them and recently made it a point to be vocal about it. BlackRock raises objections to SpiceJet accounting practices.
Indian business newspaper Mint has reported that BlackRock Inc recently raised an alarm over the functioning of SpiceJet, stating there were “substantial accounting irregularities” in the airline’s books. The objections were raised during a shareholder meeting held on December 30, 2021, where SpiceJet proposed the vote for Shiwani Singh to be reappointed on the audit committee of the Board of Directors.
Per Mint, BlackRock stated that “we believe the audit committee bears some responsibility.” Documents sighted by Mint showed that over 50 percent of public institutions voted against Singh’s re-appointment and 46.76 percent of large investors against accepting financial statements for the fiscal ending March 2021. Blackrock voted against the company resolutions and voted to reject the financial statements being adopted, due to “serious qualifications by auditors.” Other institutional investors such as American Century Investments, LGIM, and State Street Global also voted against both resolutions. The resolution was however passed, since Ajay Singh and his family, who owns 59.46 percent of the airline and retail shareholders, who own 33.54 percent of the shares of the company, voted in favour of the resolutions.
SpiceJet’s statutory auditor, Walker Chandiok and Co, in a qualified comment, noted that compensation of INR 560.45 crores was accrued as other income on the books for losses incurred due to the grounding of the Boeing 737 MAX aircraft. This was done even before the funds were received from Boeing. The report from the auditor notes, “The management of the company has recognised ‘other income’ of Rs 560.45 crore for the year ended March 31, 2021 (Rs 6,718.04 million for the year ended March 31, 2020) and related ‘foreign exchange loss on restatement’ of Rs 270.61 million for the year to March 2021 for the amount charged to Boeing for reimbursement of expenses incurred on Boeing 737 Max aircraft, which has been grounded since March 2019.”
The airline denies there are financial irregularities
A spokesperson of SpiceJet said: “There is only one qualification that has been mentioned by the auditors and the same is on account of difference in the opinion between the views of the management and the auditors regarding the manner and timing in which the compensation from the manufacturer of grounded 737 MAX aircraft is to be accounted. These are not financial irregularities and the same has been disclosed by the company in all transparency with full disclosures at all relevant times. In fact, the view of the management on the said qualification was disclosed and filed with BSE on June 30, 2021.”
“The management always believed that it will be able to recover the compensation from the aircraft manufacturer, which was the basis for the management to recognize the amounts in the manner as reflected in its financial statements quarter on quarter. The same is now manifested from the settlement which the company entered with Boeing which was announced by the company on 17 November 2021. Since the company has now entered into a settlement agreement with Boeing, the above said audit qualification will be removed/altered upon the publication of the financial results for the quarter ended 31 December 2021.”
“In any event, the resolutions put to vote at the AGM held on 30 December were passed by the majority shareholders voting over 98% in favour, as per the provisions of the Companies Act and the majority of funds voted in favour of both these resolutions.”
SpiceJet is due to disclose its quarterly results on February 14, and we will get more insight into the settlement agreement with Boeing on further disclosures from them.
Ajay Awtaney is the Founder and Editor of Live From A Lounge (LFAL), a pioneering digital platform renowned for publishing news and views about aviation, hotels, passenger experience, loyalty programs, travel trends and frequent travel tips for the Global Indian. He is considered the Indian authority on business travel, luxury travel, frequent flyer miles, loyalty credit cards and travel for Indians around the globe.